A California federal court recently held in Rushing v. Viacom, Inc. that an arbitration provision in Viacom’s End User License Agreement (“EULA”) was one click shy of enforceability, and denied the company’s motion to dismiss claims against it pending arbitration. Plaintiffs did not receive sufficient notice of the provision when downloading a children’s game called Llama Spit Spit, the court found, because the user could access the application without clicking on the link to the EULA.

The court relied on this fact in rejecting Viacom’s contentions that the plaintiff had either actual or constructive notice of the arbitration provision. Viacom attempted to establish actual notice by arguing that the underlying complaint contained a quote from the section of the app description that also notifies readers that “use of [the] app is subject to the Nickelodeon End User License Agreement” and that the EULA contains an arbitration provision.

That argument fell flat, the court reasoned, because to read that description the plaintiffs would have had to click a hyperlink titled “more” — and the plaintiffs could have downloaded the app without doing so. “In this circumstance, the mere fact that the complaint happens to quote from the same section of the app description that helps Viacom on this motion is not at all sufficient for Viacom to carry its burden of proving actual notice by a preponderance of the evidence,” the court concluded.

Likewise, Viacom failed to show that the plaintiffs had constructive notice of the arbitration provision. The EULA in question is a “browsewrap agreement,” to which a user agrees simply by using the website. The validity of this type of agreement “turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract,” the court noted. Again, the “more” hyperlink sunk Viacom’s argument for enforceability. The court reasoned that because there was no need for users to click on that hyperlink to download and use the app, and nowhere else were they warned that using the site constituted acceptance of the EULA, they could not be held to its terms.

Key Takeaway: The Rushing case serves as a reminder that arbitration is a creature of contract, and basic rules of offer and acceptance apply. As noted by the court: “A user cannot accept an offer through silence and inaction where she could not reasonably have known that an offer was ever made to her.” At least in this instance, an arbitration provision in an EULA tucked behind an ignorable hyperlink did not get the job done.

Matt has counseled clients on the evaluation of data privacy risks, responses and solutions, and he serves as a breach coach, providing analysis and advice to address data breach events, including forensics, notification pursuant to federal and state laws, credit monitoring, and public relations issues. In addition to breach response, Matt has counseled insurers on the underwriting of cyber/tech policies.

In the new digital world, individuals and businesses are almost entirely dependent on computer technology and electronic communications to function on a daily basis. Although the power of modern technology is a source of opportunity and inspiration—it also poses huge challenges, from protecting privacy and securing proprietary data to adhering to fast-changing statutory and regulatory requirements. The Cyber Law Monitor blog covers privacy, data security, technology, and cyber space. It tracks major legal and policy developments and provides analysis of current events.

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